Fraud,Waste and Control Loss at Foreign Subsidiaries
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This document discusses key areas to consider in identifying and reducing fraud, waste, and control losses at foreign locations: professionalism, audit, process, and policy. It provides a 10-point assessment scale for each area and an embedded calculator to estimate potential loss rates ranging from 5-30% based on the scores. Several examples are given showing how different combinations and focuses on the areas can affect loss percentages. The conclusions emphasize that the biggest levers for reducing risk are professionalism through developing staff and implementing standard company processes across locations.
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Fraud,Waste and Control Loss at Foreign Subsidiaries
- 1. IdentifyingandReducingFraud,WasteandControlLossesat ForeignLocations Assessment Tool and Discussion of 4 Key Areas Bill Kohnen
- 2. 4 Key Areas For Consideration • Professionalism • Audit • Process • Policy Combined performance on these can result is range of loss from a practical range of loss fro 5% to 30%. Excludes absolute extremes which if really existed would not be sustainable
- 3. Modeland DiscussionDO NOT Consider CompliancewithSarbanes Oxley or FCPA • This model does NOT consider Legal Compliance requirements or risk • This only looks at loss as a % of the Foreign Locations Spending • For some companies the benefits of operating in a low cost country may so far outweigh concern higher absolute costs that they may chose not to be concerned about “tolerable level of loss” • Calculator based on proprietary data/experience. Not meant to be exact rather general guidance on potetial loss.
- 4. Assessment Category 1 2 3 4 5 6 7 8 9 10 Professionalism Family Members No Training or background Some OJT Mix Experienced and others Local Professional Accredidation Training Some with Broader training Some Integration with Corporate Functional Group Frequnet Professional integration of Professional Functions Rotation of positions between Divisions Degreed Experienced Professionals Global Experience Audit No Audit review by Site Management GM, HR Some review By LocalFinance Annual Local Audit Annual Local with Outside review Occassional Corp Audit Regularlar corp review of many functional areas Site Integrated into Corporate Always one site Fnctional Leader from other site Integrated into Process Process No Irregularily Set and reviewed Locally no documentation Informal Undocumented Minimal Documentation Manual Local Complex Documented Manual more streamlined Including step with corp Some automation with local transparency Reporting on process itself Local connected with corpoarte Single Corporate with ww transparency Policy No Policy Unwritten written but no control and set by Local GMlocal Local writen control and review by 2 Local Execs Local witten control and audit repoting to Corp Complex Local control different from Corp ocasional Corpo site review Site and Corp Link wit regular reviews by corporate Corporate and Local Linked and strightforward Site Person with Corporate reporting Equal Level GM and Policy with separate reporting Single Corporate Platform and policy with transparency of policy and update
- 5. Calculator Calculator will be imbedded in e-copy of presentation Category Score Process 5 Audit 5 Policy 5 Professional Staff 5 Potential Loss 12.1%
- 6. Examples–ExcludingExtremes Category Score Process 5 Audit 5 Policy 5 Professional Staff 5 Potential Loss 12.1% Category Score Process 3 Audit 8 Policy 3 Professional Staff 3 Potential Loss 18.3% Audit Driven Balanced Category Score Process 8 Audit 5 Policy 5 Professional Staff 8 Potential Loss 8.5% Staff & Process Category Score Process 4 Audit 8 Policy 8 Professional Staff 4 Potential Loss 11.6% Audit & Policy Focus Category Score Process 4 Audit 6 Policy 5 Professional Staff 4 Potential Loss 13.9% Generally well run Corporations in first 10 years Category Score Process 8 Audit 8 Policy 8 Professional Staff 8 Potential Loss 7.6% Realistic Optimum
- 7. Conclusions • Biggest Levers to Reduce Risk of Loss are Professionalism and Process • Both areas develop and tend to improve overtime and are hard to put in place on Day 1 • Investing in and developing people helps • Regular interaction with variety of Corporate functions helps • Bringing in Standard Company Processes will reduces loss • Expense • Accounting • Hiring • Purchasing
- 8. Conclusions • Traditional Audit and Policy Driven Approaches provide some containment but still result in ongoing loss level • Further investment in Audit and Policy has less return than other areas